A Procurement Perspective: Risk Management Can Light (and Lighten) the Way

Today, Spend Matters would like to Welcome Richard D. Rich, CPM, to Spend Matters. Richard is a career veteran of both public and private sector procurement organizations (he’s also an ISM J. Shipman award winner). But he recently transitioned over to managing supply risk for his current employer. He’s one of the most forward thinking folks in the practitioner space that I’ve met when it comes to supply risk. Richard fundamentally understands it from a supply chain perspective (even though he's now working more closely with his finance organization than ever before and must also speak their language). Spend Matters looks forward to his continued contributions in the area of supply risk in the weeks and months to come. - Jason

I’ve come to believe there is a need for light, fast and quick supply chains to assist in keeping companies vibrant and competitive. There is a need for a supply chain that effectively supplies the right product, at the right time, in the appropriate quality and quantity and at the right price. For years, we’ve been watching ideas come forward to strengthen supply chains (e.g., JIT programs). What’s difficult for those like me who’ve been in this environment for decades is keeping all these ideas straight and knowing how best to apply them correctly in rapidly changing economies.

If you’re in a similar situation to me, I think you’ll appreciate my story. In recent years, I was fortunate to have been redeployed in my company so I could bring my supply chain skill set to implementing a risk management strategy for the organization. In so doing, the entire process and experience has led me to open my eyes to some strategies that I believe will reduce costs of the elements of supply chain.

Risk Management has the ability to bring “critical thinkers” out of their silos in to a project setting to analyze the risk involved with threats and weaknesses facing an organization. The critical thinkers bring their internal expertise to the table representing their silo. Often, for the first time, they enlighten other critical thinkers in the context of what happens in their silos. In the true meaning of “team”, lights and ideas go on all over the place. There are comments often like, “I did not realize …” Or “You do that, but what if you did this?” Ideas, solutions and improvements are often the end product.

In my new endeavors managing a supply risk program, I’ve spent significant time reviewing our most critical contracts and our most essential strategic suppliers. In this process, I have found that risk management analysis tools, when applied to looking at how we manage procurement activities, can enhance/strengthen many facets of the supply chain. Moreover, periodic reviews of our critical alliances, in a risk management context, can highlight weaknesses and help us to develop mitigation approaches. If we could take a strategic relationship and review the alliance through a risk management lens, it is my contention that we can quickly begin to see several weaknesses, opportunities and threats. By putting these on the table, it can help to develop risk mitigation strategies and roadmaps to improvement.

It seems to me that spending time reviewing a defined risk and the mitigation strategy fits hand in glove with Supply Chain. Various points in the Supply Chain Model lend themselves to this process very conveniently. A deep dive investigation on a key supplier is one example. Negotiating positioning when renewing or putting in place a strategic alliance is another.

In only a few years digging into supply risk, I’ve found that Risk Management analyses can highlight points for improvement, educate those involved across functional teams and, overall, help to improve potential outcomes when considering the mitigation strategies. Moreover, proactive analyses can help us to develop confidence in potential solutions (which we can pull out of our supply chain hat when and if needed), save money and lighten everyone’s load.

Spend Matters would like to thank Richard Rich for sharing his thoughts on supply risk.